Bank of America's production mix shifts more toward home equity

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Bank of America's first-mortgage production dropped almost 26% year-over-year in the fourth quarter of 2018, but it experienced a less severe 10% decline in home equity lending during the same period.

First-mortgage originations, nearly 20% of which came through the digital channel, totaled $36.4 billion during the quarter. Home-equity production totaled nearly $4.1 billion between October and December of last year.

Despite the decline in home lending, Bank of America produced a record $7.3 billion in net income from the quarter. The gain stemmed largely from tax reform, and growth in other forms of consumer banking.

Bank of America's drop in mortgage originations mirrors an industrywide trend.

Bank and nonbank lenders combined are expected to record a 16% year-over-year decline in home lending for 4Q18 when all the numbers are in, according to a recent Keefe, Bruyette & Woods report. Refinance volumes are expected to fall by 45% year-to-year, as purchase lending plateaus.

While affordability constraints from higher home prices and mortgage rates are putting downward pressure on first-mortgage originations, the higher levels of home equity consumers have available to tap has made second-lien lending more attractive.

Other public companies that have recorded lower levels of home lending for last year's fourth quarter include U.S. Bank and PNC Bank.

U.S. Bank's mortgage production volume fell by more than 27% year-over-year to $9.1 billion from $12.6 billion in 4Q18, and PNC Bank's home lending fell 33% to $1.6 billion from $2.4 billion.

Wells Fargo and JPMorgan Chase also have reported lower levels of mortgage origination for 4Q18.

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Earnings Stocks Home equity loans HELOCs Originations Consumer banking Bank of America U.S. Bank PNC